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August 29, 2015

Complementary Goods in Economy

Definition: Two or more goods that satisfy the wants or needs when
consumed jointly or production of one good automatically triggers the
production of other good. Satisfaction is greater when both goods are consumed
together. (What are Substitute Goods?)

Features of
Complement Goods:

Such goods have negative cross elasticity of demand. They
will have a perfectly inelastic demand.

Goods cannot function without each other.

Dependent Nature & non-interchangeable

How do Price vary for
Complement Goods?

If the price of one good rises, so will the price of the
other, and vice versa. When two goods are complements, they experience joint
demand.